The Real Estate Industry is Changing Rapidly — Here are Six Reasons Why!
By — Alain Kapatashungu: CEO & Co-founder
Q: What brokerage clerks, telemarketers, and real estate brokers all have in common? Don’t lash at me I’m only sharing interesting readings, according to researchers at Oxford University, they’ll lose their jobs in the near future because the potential for AI to replace these jobs is estimated between 97 and 99%. Charley told Willy Loman in Arthur Miller’s play, Death of a Salesman — “The only thing you’ve got in this world is what you can sell.”
The shift that is happening in the real estate industry will go beyond taking away “what we can sell”; it is set to transform the real estate jobs. Research indicates that it isn’t only brokers but the entire industry that has to rethink how technologies, shifts in demographics and behavior, will impact upon real estate jobs and business models.
1/ New consumer requires new ways of doing real estate: According to PwC Germany, the so called “sharing economy” — where people rent and borrow goods rather than buying or even owning them — could generate US$335B in revenues by 2025. This development certainly eats up revenues and market share from the traditional real estate business.
As consumers become less predictable, psychographics where the real estate demand is driven by consumer personality, attitudes, opinions, interests, and lifestyles — are the new demographics for determining real estate success.
2/ There is need for affordable housing and infrastructure — from transport facilities to telecommunications. Urbanization is having economic and health effects on urban communities. House prices and social tensions are expected to increase, while “livability” and a sense of community will diminish.
The real estate sector can help find solutions: like social housing concepts, for example. Telecommunications systems, including high-speed internet, topped the list, along with roads and bridges, and reliable and affordable energy. Infrastructure plays a role in guiding real estate activity and greatly reinforces the need for close coordination between land-use planning and infrastructure planning.
3/ Uncertain future of real estate jobs. According to a survey, the majority of respondents think that in 50 years, robots and computers will do so much of the work currently done by humans — but few expect their own professions to experience substantial impacts. Similar irrational assessments or at least optimism bias can still be observed in the real estate industry.
a. Robotic devices will perform many tasks quickly, safely and efficiently than humans
b. Digital technology will change employment markets and organizational structures. The jobs of the future are more flexible, agile, networked and connected
c. Real estate entrepreneurs will need to create their own job. This will require entrepreneurial skills and attitudes.
These changes will have a profound impact on what it means to work in real estate.
4/ According to a WEF Report, the real estate industry consumes 40% of global energy annually, 20% of total global greenhouse gas emissions only originate from buildings, there is a projected 56% increase in building CO2 emissions by 2030, and buildings use 40% of raw materials globally. It is the largest global consumer of resources and raw materials.
The real estate sector has to demonstrate leadership as the solution provider in finding answers for the biggest challenge of our generation. In the quest for healthy, affordable and sustainable communities, real estate has a critical role to play by championing sustainability and promoting smart solutions for the built environment.
5/ Location, location, location. Has the motto lost its magic? There is a huge potential to use space more effectively: Currently, around 40 to 50% of office real estate is not being used during working hours — Considering weekends and night hours utilization rates can be as low as 10%. Similar, utilization inefficiencies can be observed in other real asset class including housing.
6/ Virtual space vs real estate: Connectivity changed the real estate space. The location is still important, but in an age of mobility for businesses and customers, the relationship between physical, virtual spaces have changed. As technology continues to evolve, its impact on the real estate space gets stronger. Virtual reality and virtual modeling such as Building Information Modelling (BIM) in real estate will change the business or even the demand for real estate.
The developments outlined above won’t happen overnight — and we’ll have plenty of time to adjust to industry shifts of the 4th Industrial Revolution. Back in 97, it seemed marginal when IBM’s SuperComputer defeated chess genius Garry Kasparov; one that didn’t affect our daily lives.
As a consequence, between the end of last century and now, we’ve accepted that computers are faster at repetitive tasks, quicker at performing tasks and more efficient in spotting patterns. Technology will overturn assumptions, whether we’re prepared or not.
The disruption has already begun: Investors forked out $1.8 billion for real estate tech startups, which was an 85% increase from the previous year (Q3 2016). Websites like Zillow offers data for potential buyers however, it’s still not a complete solution.
The largest single disruption coming to real estate will be AI. The funds and the desire are here, it’s a matter of the technology catching up. The UBER of real estate is en route, it’s just a question of who gets their first :)
Do you agree with these trends? If you have questions or want to dive deeper into this, give me a shout on Twitter @akptsh. Also, if you find yourself nodding along and love building great experiences, we’re recruiting at Frontdoor
